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By Ray Winson | 23 October 2021

The 9 Golden Rules For Restaurant Cost Control In 2021

In the next five years, The 9 Golden Rules for restaurant cost control in 2021 will be a key component of our forward thinking. In order to address some of the issues that we face with supply and demand in a changing marketplace, we need to re-examine our processes and our assumptions. However, there are some problems that cannot be solved by re-thinking or changing our strategies. In this article, I focus on two problems we currently face with supply and demand and supply chain management.


The first problem is that many restaurants are operating within a tight profit margin because they have bought too much, too fast. Many restaurants have taken on too much debt and are not able to pass on their higher costs of doing business to their customers. The result has been a situation where restaurants are forced to reduce their customer base and/or menu in order to survive in a slow market. Although lowering your menu size will reduce your overhead costs and allow you to take on more customers, lowering your market share can also have a devastating effect on your competitive position.

 

The second problem facing many restaurants today is over-supply. On a market that is increasing by 3% per year, over-supply can lead to a cut throat competition for market share. If demand outstrips supply, restaurant sales will suffer. This is why it is especially important that you take an inventory of your current market share and develop a plan for how you will continue to grow your customer base while maintaining your current market share. The bottom line is that you must stay ahead of your competition if you want to maintain your current profitability level or grow your business into new markets. Just opening another restaurant in a new location may not be a solution because of over-supply in that market.

 

Both of these problems are solved by using restaurant cost control to control labor costs. You can lower overhead expenses by having reduced labor costs and this alone will have a tremendous positive impact on your bottom line. The most common way of controlling labor costs is through quality improvement initiatives and organizing labor into team teams to maximize efficiency. Another way of reducing labor costs is to implement a scheduling system that will better coordinate the flow of work so that employees are working according to a defined schedule and are not just randomly assigned shifts.

 

The third problem is un-utilization. This is where you spend more than you make. Many restaurants have been found to have a lot of un-utilized space, including kitchens and parking structures, which means they are using these resources for activities unrelated to the cooking of food. This results in lost sales and profit margins. The solution here is to reduce the number of cooking staff and add additional kitchen staff as the demand for cooking increases. The additional kitchen staff will also increase productivity and customer satisfaction.

 

The last problem is market share. Market share is difficult to keep but is definitely avoidable. Restaurant owners can increase market share by taking on dining habits of their customers. For example, if a restaurant serves only sandwiches, it may not be as profitable as one serving full range foods, fresh vegetables and a variety of other foods. The trick is to serve as many different types of food as possible, to keep the customers happy and to entice new customers to the establishment. The more diverse the menu, the more successful the business will be.

 

The nine golden rules for restaurant cost control in 2021 will help to ensure that your business stays profitable and you are able to invest the maximum profits possible in your business.
The first rule, of course, is no cost cutting anywhere at any level. It may be tempting to look for ways to cut costs but this is a mistake that will have long term negative effects on your business.
The second golden rule is to track all expenses and record them carefully. Not only do you need to track your costs but you should also keep track of what you spend in terms of profit.

 

In addition to keeping track of your costs you will also need to track your income. Is your income increasing? If so how? Are your expenses staying level or are they going up? If they are going up then it is important to reduce your expenses and increase your income.

 

The third golden rule is to automate as much as possible. Automating parts of your business can be very advantageous in reducing errors and increasing speed. If you can automate some of the processes, you will be able to pay fewer employees and increase productivity which, in turn, will increase your profitability. In many restaurants, automatic systems are used to track everything from payroll to billing to ordering. An automatic system will ensure that you have enough staff for your menu items, that your food is delivered to your customers in a timely fashion and that you are not paying unnecessary labor costs.

 

The fourth golden rule is also related to cost control. One way to keep your costs down is to avoid using any "hidden" fees such as gratuities, taxes, special and local sales tax and other such charges. These are typically used by restaurants to attract new customers. But if you can avoid these fees, you will be able to increase your profits since your overhead will not increase.

 

The ninth golden rule, which is probably the most difficult for most restaurant owners, relates to financing. Financing is one of the major reasons that restaurant owners fail to control costs. You should always seek out financing options when you need it. This may be through banks or other institutions or through private investors.

 

Another option you may want to consider is a franchise. There are many restaurants owned by companies that now offer franchises. These companies will provide training and will oversee the operation of the restaurant. You can take advantage of their expertise in cost control. The downside is that you will now become the new owner of someone else's restaurant and, unless you have prior experience, this may not be an easy task.

 

Finally, you should examine your finances closely and make sure that you are spending your money wisely. While this is especially important if you are a restaurant owner, it can also apply to any business you own. Cutting corners on certain expenses, such as supplies and food, can help you save money and also improve your bottom line. You may even find that cutting back on some of the services you offer will allow you to increase revenue since the extra service will draw in more customers.

 

There are numerous other factors that will affect the effectiveness of your restaurant cost control efforts. Each business operates somewhat differently and therefore, different techniques will work better for each individual company. However, it is important to keep these tips in mind because they will help to ensure that your efforts are as effective as possible. Apply all of the knowledge you have gained from this article and see your profits increase.

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